The Kerala State Civil suppliers corpn Ltd, Cochin V. The ACIT, Cochin

ITA 34/COCH/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5471 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: V SATHYANARAYANAN
• Keywords: Valuation report; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K, JM & SHRI MANJUNATHA G, AM ITA NO. 34 /COCH/201 7 : ASST.YEAR 2012 - 201 3 THE KERALA STATE CIVIL SUPPLIES CORPORATION LTD. C/O.VARMA & VARMA, CHARTERED ACCOUNTANTS BLDG.NO.53/333, A,B,C,D OFF SUBHASH CHANDRA BOSE ROAD, VYTILLA P.O. COCHIN 682 019. PAN : AAACK6767F. VS. THE ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2) KOCHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI. V.SATHYANARAYANAN, CA RESPONDENT BY : SRI. A.DHANARAJ, SR.DR DATE OF HEARING : 13.12 .2017 DATE OF PRONOUNCEMENT : 14 .12 .2017 O R D E R PER MANJUNATHA G, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME - TAX - I, COCHIN, PASSED U/S 263 OF THE INCOME - TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2012 - 2013. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (CIT) ERRED IN REOPENING U/S 263 OF THE IT ACT, THE ASSESSMENT COMPLETED VIDE PROCEEDINGS OF SEC.143(3) OF THE IT ACT AFTER DUE VERIFICATION OF RELEVANT FACTS ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 2 AND LAW. THERE IS NO ERROR WHICH IS PREJUDICIAL TO THE INT EREST OF REVENUE WHICH REQUIRES REVISION U/S 263 OF THE IT ACT. 2. THE LEARNED CIT GROSSLY ERRED IN STATING THAT THE LEARNED ASSESSING OFFICER (AO) PASSED THE ASSESSMENT ORDER WITHOUT ENQUIRING THE ASPECT OF DELAYED PAYMENT OF EMPLOYEES PF CONTRIBUTION. THE LEARNED CIT OUGHT TO HAVE NOTED THAT ON RECORD, THE LEARNED AO HAD CONSIDERED THE WRITTEN SUBMISSIONS FURNISHED BY THE A PPELLANT REGARDING DELAYED REMITTANCE OF EMPLOYEES CONTRIBUTION OF PF. THE LEARNED CIT OMITTED TO NOTE THAT THE LEARNED AO, WHILE CO MPLETING THE ASSESSMENT SATISFIED HIMSELF THAT THE CLAIM MADE BY THE APPELLANT WAS RELYING ON THE DECISION OF THE HONBLE HIGH COURT O F KERALA IN THE CASE OF KERALA STATE WAREHOUSING CORPORATION LTD. AND ALLOWED THE CLAIM. IT IS NOW WELL SETTLED THAT WHERE THERE ARE TWO VIEWS POSSIBLE AND THE ASSESSING OFFICER TAKES A VIEW IN FAVOUR OF THE ASSESSEE, THERE IS NO ERROR IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE IN TERMS OF SEC.263 OF THE IT ACT. 3. THE LEARNED CIT OUGHT TO HAVE NOTED THAT THE HONB LE SUPREME COURT DECISION IN THE CASE OF CIT V. VINAY CEMENTS LTD. (213 CTR 268) IS IN FAVOUR OF THE APPELLANT AND IS THE LAW OF THE LAND. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE FURTHER ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED AO REQUIRES TO BE MODIFIED SUITABLY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012 - 2013 ON 29.09.2012 DECLARING NIL TOTAL INCOME. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 06.03.2015 ACCEPT ING THE LOSS RETURNED BY THE ASSESSEE. THEREAFTER THE PRINCIPAL COMMISSIONER OF INCOME - TAX, COCHIN - I, ISSUED SHOW ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 3 CAUSE NOTICE FOR REVISION U/S 263 DATED 25.11.2016 AND ASKED THE ASSESSEE AS TO WHY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 1 43(3) DATED 06.03.2015 SHALL NOT BE REVISED ON THE GROUNDS INDICATED IN HIS SHOW CAUSE NOTICE. THE CIT PROPOSED TO REVISED THE ASSESSMENT ORDER ON THE GROUND THAT THE A.O. HAS FAILED TO EXAMINE THE ISSUE OF BELATED REMITTANCE OF PROVIDENT FUND FOR THE MONT H OF MARCH 2012 AMOUNTING TO RS.31,64,366, WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. THE CIT FURTHER OBSERVED THAT EMPLOYEES CONTRIBUTION TO PF REMITTED BEYOND THE DUE DATE SPECIFIED UNDER RESPECTIVE ACTS, IS TREATED AS INCOME OF THE ASSESSEE U/S 2(24)(X) R.W.S. 36(1)(VA). THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER PASSED BY THE A.O. SHALL NOT BE REVISED IN TERMS OF SECTION 263 OF THE ACT. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REV ENUE, AS THE A.O. HAS CONSIDERED THE ISSUE OF BELATED PAYMENT OF EMPLOYEES PF AT THE TIME OF ORIGINAL ASSESSMENT, WHICH IS EVIDENT FROM THE FACT THAT THE A.O. ISSUED SHOW CAUSE NOTICE DATED 13.01.2015 FOR WHICH THE ASSESSEE HAS FILED REQUIRED DETAILS BY LE TTER DATED 16.02.2015. THE A.O. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HAS CHOSEN TO ACCEPT THE EXPLANATION OF THE ASSESSEE WITH REGARD TO PF. ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 4 THEREFORE, THERE IS NO REASON TO TERM ASSESSMENT ORDER PASSED BY THE A.O. AS ERRONEOUS INSOFAR AS IT I S PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO ANALYZING THE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(1)(VA), OBSERVED THAT THE DELAY OF REMITTANCE OF EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE PRESCRIBED UNDER RESPECTIVE ACTS HAS TO BE CONSIDERED WITH REFERENCE TO PROVISIONS OF SECTION 36(1)(VA) OF THE INCOME - TAX ACT, 1961. IT IS OBSERVED FROM THE RECORDS THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAD PASSED THE ORDER ON TH IS ISSUE ALLOWING RELIEF FOR WITHOUT TAKING ANY INQUIRY. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS INSOFAR AS TO PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, THE CIT SET ASIDE THE ORDER PASSED BY THE A.O. AND DIRECTED HIM TO PAS S DE NOVO ASSESSMENT ORDER IN ACCORDANCE WITH LAW AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT ERRED IN REVISI NG THE ASSESSMENT ORDER U/S 263 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ISSUE OF BELATED PAYMENT OF PF HAS BEEN CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT WITH REFERENCE TO A SPECIFIC QUESTION, FOR WHICH THE ASSESSEE HAS FILED ITS EXPLANATION. THE AR FURTHER SUBMITTED THAT THE LEARNED CIT OMITTED TO NOTE THAT THE LEARNED AO, WHILE COMPLETING THE ASSESSMENT, SATISFIED HIMSELF WITH THE CLAIM MADE BY THE ASSESSEE WAS IN ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 5 ACCORDANCE WITH THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF KERALA STATE WAREHOUSING CORPORATION LIMITED V. CIT . THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEWS ON THE ISSUE. IT IS NOW WELL SETTLED THAT WHERE THERE ARE TWO VIEWS POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LEARNED AR FURTHER SUBMITTED THAT THOUGH THE ASSESSEE HAS REMITTED EMPLOYEES CONTRIBUTION TO PF BEYOND THE DUE DATE SPECIFIED UNDER THE RESPECTIVE ACTS, BUT REMITTED THE SAME WITHIN THE DUE DATE FOR FI LING OF RETURN OF INCOME U/S 139(1) AND THE A.O. HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KERALA STATE WAREHOUSING CORPORATION LIMITED (SUPRA) . THE LEARNED AR FURTHER SUBMITT ED THAT THOUGH THE SUBSEQUENT JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SOUTH INDIA CORPORATION [(2015) 58 TAXMANN.COM 208 (KER.)] AND CIT V. MERCHEM LIMITED [(2015) 378 ITR 443 (KER.)] OVERTURN THE EARLIER DECISION IN THE CASE OF KE RALA STATE WAREHOUSING CORPORATION LIMITED (SUPRA) , IN VIEW OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF ACIT V. VICTORY AQUA FARM LIMITED [(2015) 379 ITR 335 (SC)] , THE LAW LAID DOWN BY THE EARLIER DECISION OF THE COURT CANNOT BE OVERTURNED BY THE SUBSEQUENT DECISION OF THE COURT ON AN ISSUE THAT IS PARI MATERIAL , WOULD NOT BE BINDING IF SUCH LATER DECISION IS NOT DECIDED BY A LARGER FULL BENCH AS AGAINST THE DECISION OF THE DIVISION BENCH. THE AR FURTHER SUBMITTED THAT THE ISSUE OF ALLOWABILITY OF DEDUCTION TOWARDS BELATED PAYMENT ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 6 OF PF AND ESI UNDER THE RESPECTIVE ACTS, BUT BEFORE DUE DATES SPECIFIED U/S 139(1) HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RAJASTHAN STATE BEVERAGES CORPORATION LTD. [(2017) 250 TAXMANN 16 ( SC)] , WHEREIN THE HONBLE APEX COURT HAS REJECTED THE SLP AGAINST THE ORDER OF THE HIGH COURT OF RAJASTHAN HOLDING THAT THE AMOUNT CLAIMED ON PAYMENT OF PF AND ESI HAVE BEEN DEPOSITED OR NOT BEFORE THE FILING OF RETURN, SHOULD NOT BE DISALLOWED U/S 43B OR U/S 36(1)(V) OF THE INCOME - TAX ACT, 1961. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CIT INVOKED JURISDICTION TO REVISE THE ASSESSMENT ORDER U/S 263 OF THE INCOME - TAX ACT, 1961, FOR THE REASON THAT THE A.O. HAS FAILED TO EXAMINE THE ISSUE OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF, WHICH CAUSED PREJUDICIAL TO THE INTEREST TO THE REVENUE. THE CIT FURTHER OBSERVED THAT THE A.O. NOT ONLY FAILED TO EXAMINE THE ISSUE, BUT ALSO FAILED TO APPLY HIS MIND IN THE RIGHT PERSPECTIVE, WHICH CAUSED PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSE SSMENT ORDER PASSED BY THE A.O. NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE ISSUE OF ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 7 PROVIDENT FUND HAS BEEN CONSIDERED BY THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT BY A SPECIFIC QUESTION FOR WHICH THE ASSESSEE HAS FILED ITS R EPLY. THE A.O. AFTER SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE AND ALSO CONSIDERING THE RATIO OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. KERALA STATE WAREHOUSING CORPORATION LIMITED HAS TAKEN ONE OF THE POSSIBLE VIEWS WITH WHICH THE CIT DOES NOT AGREE, MAY NOT BE A REASON FOR TREATING THE ASSESSMENT ORDER AS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. THE CIT HAS POWERS TO REVISE THE ASSESSMENT ORDERS IF HE FINDS THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, BUT TO INVOKE THE JURISDICTION U/S 263 OF THE ACT, TWIN CONDITIONS PRESCRIBED U/S 263 MUST BE SATISFIED, I.E., THE ORDER OF THE A.O. IS ERRONEOUS AND IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE VICE VERSA, THEN THE CIT CANNOT ASSUME THE JURISDICTION TO REVISE THE ASSESSMENT ORDER. THIS IS BECAUSE THE TWIN CONDI TIONS PRESCRIBED U/S 263 ARE CO - EXISTS. SOMETIMES THE ORDER PASSED BY THE A.O. MAY BE ERRONEOUS BUT IT MAY NOT BE OF PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, INVOKE THE JURISDICTION U/S 263, THE CIT HAS TO POINT OUT HOW THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS CASE, ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE ISSUE O F BELATED PAYMENT OF ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 8 EMPLOYEES CONTRIBUTION TO PF HAS BEEN EXAMINED BY THE A.O. IN ASSESSMENT PROCEEDINGS BY ISSUING A SPECIFIC QUESTIONNAIRE DATED 13.01.2015 FOR WHICH THE ASSESSEE HAS FILED A LETTER DATED 16.02.2015 EXPLAINING THE REASON FOR DELAY IN PA YMENT OF PF. THE ASSESSEE HAS ALSO EXPLAINED IN THE LIGHT OF THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF KERALA STATE WAREHOUSING CORPORATION LIMITED (SUPRA) AND ARGUED THAT THE EMPLOYEES CONTRIBUTION REMITTED AFTER DUE DATE PRESCRIBED UN DER RESPECTIVE ACTS, BUT BEFORE THE DATE OF FILING OF RETURN OF INCOME AS PER SECTION 139(1) OF THE INCOME - TAX ACT, 1961, CANNOT BE DISALLOWED IN VIEW OF THE AMENDED PROVISIONS OF SECTION 43B OF THE I.T.ACT. THE A.O. AFTER CONSIDERING THE EXPLANATION OF TH E ASSESSEE HAS TAKEN ONE OF THE POSSIBLE VIEWS WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE A.O. IS UNSUSTAINABLE IN LAW. THE QUESTION OF DEDUCTIBILIT Y OF BELATED PAYMENT OF PF HAS BEEN CONSIDERED BY THE JURISDICTIONAL HIGH COURT IN TWO CASES; IN ONE CASE, THE JURISDICTIONAL HIGH COURT HAS TAKEN A VIEW THAT BELATED PAYMENT OF PF WITHIN THE DATE PRESCRIBED UNDER THE RESPECTIVE ACTS CANNOT BE ALLOWED AS D EDUCTION. IN THE EARLIER DECISION, THE JURISDICTIONAL HIGH COURT IN THE CASE OF KERALA STATE WAREHOUSING CORPORATION LIMITED, AFTER CONSIDERING THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT V. VINAY CEMENT (213 CTR 268) , OBSERVED THAT THE BELATED P AYMENT OF CONTRIBUTION TO PF BEFORE THE DUE DATE OF FILING OF RETURN IS SUFFICIENT COMPLIANCE OF PROVISIONS OF SECTION 43B AND HENCE ALLOWABLE AS DEDUCTION. THOUGH THE ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 9 SUBSEQUENT DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MERCHEM LTD. (SUPRA) IS IN FAVOUR OF THE REVENUE WITH REGARD TO BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF, THE A.O. HAS TAKEN A POSSIBLE VIEW ON THE BASIS OF EARLIER DECISION OF THE JURISDICTIONAL HIGH COURT. SINCE THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEWS, I N OUR CONSIDERED VIEW, THE VIEW TAKEN BY THE A.O. IS A POSSIBLE VIEW. THIS VIEW IS FURTHER SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. [(1973) 88 ITR 192 (SC)] , WHEREIN THE HONBLE SUPREME COURT OBSE RVED THAT IF THERE IS TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. IN THIS CASE, THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEWS AND ALLOWED THE DEDUCTION TOWARDS BELATED PAYMEN T OF EMPLOYEES CONTRIBUTION TO PF IN THE ASSESSMENT PASSED U/S 143(3) OF THE ACT. THE VIEW TAKEN BY THE A.O. IS ONE OF THE POSSIBLE VIEWS. THE CIT MAY NOT AGREE WITH THE VIEW TAKEN BY THE A.O., BUT IT CANNOT BE A REASON FOR TREATING THE ASSESSMENT PASSED BY THE A.O. AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE CIT DEMONSTRATES THAT THE VIEW TAKEN BY THE A.O. IS UNSUSTAINABLE IN LAW. THIS LEGAL VIEW FURTHER SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. MAX INDIA LTD. [(2007) 295 ITR 282 (SC)] . WE FURTHER NOTE THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GABRIEL INDIA LTD. [(1993) 71 TAXMAN 585 (BOM.)] OBSERVED THAT ONCE THE A.O. HAS CONSIDERED THE ISSUE AND ALLOWED THE CLAIM, THEN THE CIT CANNOT ASSUME JURISDICTION TO REVISE THE ASSESSMENT ORDER ON ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 10 THE GUISE OF INADEQUATE INQUIRY OR LACK OF INQUIRY. THEREFORE, WE ARE OF THE VIEW THAT, THE CIT WAS INCORRECT IN COMING TO THE CONCLUSION THAT THE ORDER OF THE A.O. IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 10. COMING TO THE CASE LAWS RELIED UPON BY THE ASSESSEE, THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SARAVANA DEVELOPERS [(2016) 68 TAXMANN.COM 148 (KAR.)] , WHEREIN THE HONBLE COURT OBSERVED THAT WHERE THE ASSESSING OFFICER FOUND TO HAVE APPLIED HIS MIND BEFORE ACCEPTING VALUATION DECLARED BY THE ASSESSEE IN WORK - IN - PROGRESS REPORT AND THE COMMISSIONER FAILED TO SATISFY THAT VALUATION REPORT ACCEPTED WAS ER RONEOUS , THE ORDER PASSED U/S 263 BY THE COMMISSIONER SETTING ASIDE THE ASSESSMENT WAS BA D IN LAW. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: - THE COMMISSIONER HAS INVOKED THE PROVISIONS OF SECTION 263 ONLY FOR THE REASON THAT THE ASSESSING OFF ICER HAS NOT SPELT OUT IN HIS ORDER REGARDING THE VERIFICATION OF THE WORK - IN - PROGRESS REPORT AND THE REASONS FOR ACCEPTING THE VALUATION OF WORK - IN - PROGRESS REPORT DECLARED BY THE ASSESSEE. [PARA 12] IT IS ALSO NOTICED THAT THE TRIBUNAL HAS CALLED FOR THE RECORDS OF ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR AND EXAMINED THE VARIOUS DETAILS, QUESTIONNAIRE CALLED BY THE ASSESSING OFFICER ALONG WITH NOTICE UNDER SECTION 142(1) AND ADDITIONAL DETAILS VI DE QUESTIONNAIRE (2) VIS - A - VIS THE ASSESSEE'S REPLY TO THE SAID QUESTIONNAIRE. [PARA 14] THE EXAMINATION OF THE FIGURES AS REFLECTED IN THE COMPUTATION OF DEVELOPMENT CHARGES ESTABLISHES THAT THE DEVELOPMENT CHARGES CLAIMED BY THE ASSESSEE PER SQ. FT. IS RS. 251.11/ - WHICH IS LOWER THAN RS.299.41/ - ACCEPTED BY THE DEPARTMENT FOR THE ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 11 ASSESSMENT YEAR 2007 - 08 WHILE CONCLUDING THE ASSESSMENT UNDER SECTION 143(3). ONE MODE OF COMPUTATION WORKS OUT TO RS. 296.68/ - PER SQ. FT. THE DEVELOPMENT CHARGES OF RS. 25 1. 11/ - PER SQ. FT. CLAIMED BY THE ASSESSEE IS JUST AND REASONABLE AND DOES NOT RESULT IN ANY LOSS TO THE REVENUE. THUS, THE COMMISSIONER INVOKING THE PROVISIONS OF SECTION 263, IS UNCALIED FOR AS THE ORDER PASSED BY THE ASSESSING OFFICER IS NO WAY PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THE REVENUE HAS MISERABLY FAILED TO SATISFY THAT THE VALUATION OF THE WORK - IN - PROGRESS ACCEPTED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. YET ANOTHER IMPORTANT ASPECT WHICH IS SIGNIFICANT TO NOTICE IS THAT THE ASSESSING OFFICER HAS ACCEPTED THE VALUATION OF THE WORK - IN - PROGRESS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08, WHILE CONCLUDING THE ASSESSMENT UNDER SECTION 143(3). [PARA 16] THE TWIN TESTS PROPOUNDED BY THE COURTS FOR INVOKING THE PROVISIONS OF SECTION 263 ARE NOT SATISFIED IN THE INSTANT CASE. THE COMMISSIONER PROCEEDED TO INITIATE PROCEEDINGS UNDER SECTION 263 ONLY ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT ASSIGNED ANY REASONS FOR ACCEPTING THE VALUATION OF THE WORK - IN - PROGRESS DECLARED BY THE ASSESSEE. AS PER THE MATERIALS PLACED BEFORE THE TRIBUNAL IN THE RECORDS PERTAINING TO THE ASSESSMENT YEAR IN QUESTION, A DETAILED EXAMINATION IS MADE BY THE TRIBUNAL AND THE TRIBUNAL IS OF THE VIEW THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND BEFORE ACCEPTING THE FIGURE DECLARED BY THE ASSESSEE IN THE WORK - IN - PROGRESS REPORT. SUCH AN ORDER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS NOT A CASE OF 'LACK OF INQUIRY'. FURTHER, INQUIRY ORDERED BY THE COMMISSIONER WOULD AMOUNT TO FISHING/ROWING INQUIRY IN THE MATTER ALREADY CONCLUDED. [PARA 19] THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V. DR. L. NAREN DRA PRASAD [IT APPEAL NO. 473 OF 2009, DATED 18 - 8 - 2015 ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 12 TO CONTEND THAT GENERAL L Y IN THE BUSINESS OF REAL ESTATE, THE NET PROFIT WOULD BE 8 PER CENT AS ACCEPTED BY THE DEPARTMENT. IN THE INSTANT CASE, THE PROFIT DECLARED BY THE ASSESSEE WORKS OUT TO MORE THAN 8 PER CENT THAT IS NORMALL Y ADOPTED AND ACCEPTED BY THE DEPARTMENT. HOWEVER, IN THE COMPUTATION OF WORK - IN - PROGRESS MADE BY THE APPEL L ATE COMMISSIONER, THE PROFIT MARGIN WORKS OUT TO MORE THAN 31.8 PER CENT WHICH IS PRACTICABLY NOT ACCEPTABLE. ACC ORDINGLY, ON THIS COUNT ALSO, THE ORDER PASSED BY THE COMMISSIONER COMPUTING THE MARGIN AT MORE THAN 31 PER CENT WHICH IS NOT NORMAL L Y WORKABLE IN THE BUSINESS OF REAL ESTATE COULD NOT BE ACCEPTED. THIS VIEW IS ALSO SUPPORTED BY THE DIVISION BENCH JUDGMEN T OF THIS COURT IN DR. L. NARENDRA PRASAD'S CASE (SUPRA). [PARA 20] THE TRIBUNAL HAVING CONSIDERED THE MATERIAL PLACED BEFORE IT, RIGHTLY SET ASIDE THE ORDER PASSED UNDER SECTION 263, AS NOT SUSTAINABLE. ACCORDINGLY, THE ASSESSEE'S APPEAL IS AL L OWED AS THE CONSEQUENTIAL ORDER PASSED UNDER SECTION 143(3), READ WITH SECTION 263 DOES NOT SURVIVE FOR CONSIDERATION AS HAVING BECOME INFRUCTUOUS. NO EXCEPTION CAN BE FOUND WITH THE WEL L REASONED ORDER PASSED BY THE TRIBUNAL. [PARA 21] 11. THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT V. GABRIEL INDIA LTD. (SUPRA) HAS CONSIDERED A SIMILAR ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 263 OF THE INCOME - TAX ACT. THE HONBLE HIGH COURT AFTER CONSIDERING RELEVANT PROVISIONS, HELD THAT THE ORDER PASSED BY THE A.O. COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THE RELEVANT PART OF THE ORDER IS EXTRACTED BELOW: - THE PO W ER OF SUO MOTU REVISION UNDER SUB - SECTION (1) IS IN THE NATURE OF S UPERVISORY JURISDICTION AND THE ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 13 SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB - SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; AND (I I) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. ONE FINDS THAT THE EXPRESSIONS 'ERRONEOUS', 'ERRONEOUS ASSESSM ENT' AND 'ERRONEOUS JUDGMENT' HAVE BEEN DEFINED IN BLACK'S LAW DICTIONARY. ACCORDING TO THE DEFINITION, 'ERRONEOUS' MEANS 'INVOLVING ERROR; DEVIATING FROM THE LAW'. 'ERRONEOUS ASSESSMENT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF THE ASSESSING OFFICER IN FIXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, 'ERRONEOUS JUDGMENT' MEANS 'ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES'. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSI ONER FOR THAT OF THE I TO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME E STIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTI MATE MADE BY THE OFFICER CONCERN ED WAS ON THE LOWER SIDE AND LEFT ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 14 TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETER MINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE - EX A MINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT P REJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT - MATTER OF REVISON BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX 'WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THEREFORE, IN ORDE R TO EXERCISE POWER UNDER SECTION 263(1) THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY THE ITO WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THAT IT MUST BE AN ORDER WHICH IS NOT IN AC CORDANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE ITO WITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE. AN ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF IT IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE D UE TO THE STATE HAS NOT BEEN REALISED OR CANNOT BE REALISED. THERE MUST BE MATERIAL AVAILABLE ON THE RECORD CALLED FOR BY THE COMMISSIONER TO SATISFY HIM PRIMA FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PR OCEEDINGS FOR ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 15 REVISION. EXERCISE OF POWER OF SU MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL - SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE A UTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVES WERE AVAILABLE FROM T HE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. THE ITO IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASS E SSEE. THE ASSESSEE HAD GIVEN A DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE ITO COULD NOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE , COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE ITO TO RE - EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. HENCE, THE PROVISIONS OF SECTION 263 WERE NOT APPLICABLE TO THE INSTANT CASE AND, THEREFORE, THE COMMISSIONER WAS NOT JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER. 12. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATIOS OF CASE LAWS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, WE SET ITA NO. 34 / COCH /201 7 . THE KERALA STATE CIVIL SUPPLIES CORPN LTD . 16 ASIDE THE ORDER PASSED BY THE CIT U/S 263 AND RESTORE THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE A CT. 1 3 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF DECEMBER , 2017. SD/ - SD/ - ( GEORGE GEORGE K.) ( MANJUNATHA G.) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN ; DATED : 14 TH DECEMBER , 2017. DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE PR. CIT, KOCHI . 4. THE PR. CIT(A) - I , KOCHI . 5. DR, ITAT, COCHIN 6. GUARD FILE.